Internalizing the Business Model

A critical aspect of aligning a team to produce the "right" product I often counsel the importance of getting everyone who contributes to fully internalize as much as possible the business model for the product.

By business model I mean that the perceived value of the product to the customer be highly aligned to the way that the customer pays, or will pay, for the value derived. For example, in a freemium model, the customer should pay for additional capabilities that's value is clearly understood to expand the value of the base product. The great aspect of this model is there is enough context in the base free model that the value is more obvious.

Once the model is truly internalized by your team they will be able to make clear and quick decisions during the development process that can dramatically speed up the creation of product. What is amazing is when the team discovers that the plans aren't aligned with the business model and they speak up to make the product better. They can champion the features that will more closely align to the business model and/or champion the change to the business model that more closely aligns to the true customer value derived from the product.

A team that is aligned in this manner is unstoppable. Some of my best experiences have been setting up this kind of environment then getting out of the way.

New and More Innovative Mistakes

One thing I always wanted to hear from my development, quality, design and project management teams was that they made mistakes. As long as they were new mistakes I considered them great learning opportunities.

Every now and then I would see a repeat of something we had done wrong before. Pretty much always the reason the error would repeat was due to a failure to truly internalize the first experience into the (dare I say) processes in the organization.

Building an environment where individuals are not punished for making mistakes, especially new and more innovative mistakes is critical. They should be highlighted as successes!

What the pivot?

This is my favorite new (well, for me at least) investor/startup term.

I used to be an investor in the fun .bomb times before I went back to Apple to create more products. Back then when a company was failing they either were closed down or went through what I called an exercise in surface tension (how many startup bricks do you have to tie together to get them to float) aka mergers.

Nowadays when a startup finds that what it set out to do isn't working they 'pivot'. Basically completely change their business, technology, idea, etc. but continue to spend their original investment money. I believe this is a good thing as long as the investor(s) still believe in the team.

This appears to me to be a symptom of the increased number of startups being invested in now at even earlier stages. Their are some special considerations that I believe should be addressed during a pivot.

1) Does the investor(s) want to continue to fund the team?

If not, they should be able to exit the relationship.

If they do, should any note or funding round be revised in some fashion?

2) If none of the investors believe in the team or new direction should the entrepreneurs continue on anyway?

This comes down to burning bridges. If the new idea succeeds then the bridge is fine. If it flops then the investors will probably not make good future references.

A beginning

Hello everyone. This being my first post it seemed appropriate to give a bit of background of my motivation for even bothering to fill this space.

First, as a journeyman angel in the high tech landscape of the bay area I wasn't seeing much in the way of entry level discussions. There's great VC blogs like Fred Wilson (avc.com), and plenty of twitter feeds to follow, but I thought it would be nice to write some longer expositions. The focus will be on my thoughts, successes, failures and random adventures wandering through the interesting times of being an angel in these times.

Second, today is an introspective day being the anniversary of an event that cannot be forgotten. It makes me sit back and think about the meaning behind it all. Why am I here and what difference can I make. Perhaps this little space will be something I can give back for entrepreneurs, fellow investors and anyone else bored enough to read this.

Third, my life is all about learning and I firmly believe that one of the best ways to learn is to attempt to teach what has been learned. That's the premise and I hope everyone enjoys the ride.

Future posts will be about specific ideas or points that resonate with me. Hopefully they will resonate with you as well.

David